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Payments News Update -- July 31, 2019

Posted  July 31, 2019

Legal and Regulatory Developments

SPOTLIGHT: Visa and Kroger Settle Debit-Routing Lawsuit, but Partial Credit Card Boycott Continues
Digital Transactions News – July 31, 2019

The Kroger Co. and Visa Inc. have settled a 2016 federal lawsuit in which Kroger alleged Visa interfered with its transaction-routing plans for EMV debit cards, Digital Transactions News has learned. In a separate dispute, however, the leading stand-alone supermarket chain is still boycotting Visa credit cards in some of its stores.

The lawsuit that Kroger filed in U.S. District Court in Cincinnati was dismissed July 24. Visa reported the settlement in a recent filing with the Securities and Exchange Commission. . . .

UK Finance Watchdog Issues Guidance on Regulation for Bitcoin and Crypto Assets
Coindesk – July 31, 2019

The U.K. Financial Conduct Authority (FCA) has finalized its guidance on crypto assets, clarifying which tokens fall under its jurisdiction.

Most of the rules issued Wednesday were proposed in consultation paper CP19, which was released for public comment in January. As widely expected, the final guidance does not drastically alter the regulatory landscape, instead specifying when certain types of crypto assets fall under existing categories. . . .

Capital One Hit With Class-Action Lawsuit Following Massive Data Breach
Forbes – July 30, 2019

Following a massive data breach that compromised the personal information of more than 100 million people, Capital One has been hit with a class-action lawsuit. A complaint from the law firm of Morgan and Morgan was filed today with the United States District Court for the Eastern District of Virginia on behalf of the millions of consumers affected by the breach. The legal challenge alleges that Capital One failed to take “reasonable care” to secure sensitive information belonging to its customers.

Capital One first disclosed the security breach on the evening of July 29, 2019. According to the company, personal information belonging to more than 100 million people was compromised in the breach. Included in the breach is information dating back as far as 2005. Customer data accessed by the hacker includes full names, physical addresses with full ZIP and postal codes, phone numbers, email addresses, dates of birth and self-reported income—information that is typically requested on credit card applications. Capital One said that credit scores, credit limits, account balances, payment history and contact information was also stolen. . . .

Blow to Applicants in UK Class Actions as Mastercard Wins Right to Appeal
Lexology – July 30, 2019

The UK class action regime must take a break whilst the Supreme Court (UKSC) hears the appeal in Merricks v MasterCard concerning the proper approach to certification of a class action. Two applications for a Collective Proceedings Order (CPO) brought by organisations aiming to recover damages from truck manufacturers have already been adjourned. However the effect will also be felt by all similar CPO applicants until the law is settled by the UKSC. With the UKSC unlikely to hear the appeal in Merricks until Spring or Summer 2020, clarification of the law is unlikely until late 2020 or early 2021. This is a blow to applicants, who will be forced to sit tight until then. However, with such significant implications for the UK class-action regime – and with potentially billions at stake – it is vital that the UKSC gives a definitive ruling in Merricks.

Introduced in 2015, the UK’s consumer rights class action regime allows individuals and businesses within a defined ‘class’ to bring collective proceedings in the Competition Appeal Tribunal (CAT) for breaches of competition law. . . .

ABA Raises Questions About Rakuten Plan to Obtain Regulatory Approval for US Bank
Mobile Payments Today – July 29, 2019

The American Bankers Association has come out against a plan by Japanese e-commerce site Rakuten Inc. to obtain a charter to operate in the U.S.

Rakuten, on Friday, announced that it would seek regulatory approval to obtain an industrial bank charter in the state of Utah. The plan calls for an application through its Rakuten Card unit to establish a bank that would offer business loans and deposits, personal loans and issue and acquire credit cards. . . .

The Key Issues To Watch In UK Mastercard Class Action Case
Law360 – July 29, 2019 (subscription required)

The U.K.’s highest court is set to offer critical guidance for the country’s infant antitrust collective action regime in a £14 billion ($17.2 billion) suit against Mastercard in the long-running battle over its swipe fees.

Here, Law360 looks at the key issues that will be decided by the Supreme Court, including what the test for certification should be, how to apply rules requiring claimants to prove the amount of their losses to a class suit and how the outcome will affect the environment for bringing class action lawsuits in the U.K. . . .

BB&T/SunTrust Merger Raises Questions On Capitol Hill
PYMNTS – July 24, 2019

In banking, “too big to fail” has become shorthand for financial firms of scale and reach so significant that any operational or financial difficulties may have ripple effects on the economy at large.

In a congressional hearing on the proposed merger of SunTrust and BB&T, size was in focus. . . .

New York Securities Regulator, NYDFS, Creates New Division to Oversee and Develop Fintech and Cryptocurrencies
Crowdfund Insider – July 24, 2019

One year ago, former NYDFS (New York Department of Financial Services) Superintendent Maria T Vullo, issued a statement in which she said her organization, which regulate New York financial markets, “fiercely opposes the Department of Treasury’s endorsement of regulatory ‘sandboxes’ for financial technology companies.” Vullo’s strong stance was based on her belief that fintech firms were trying to wiggle out of abiding by laws that other financial firms were beholden to: “The idea that innovation will flourish only by allowing companies to evade laws that protect consumers, and which also safeguard markets and mitigate risk for the financial services industry, is preposterous. . . Toddlers play in sandboxes. Adults play by the rules,” she said.

But yesterday, the NYDFS’s new superintendent, Linda A Lacewell announced the creation of a new, “Research and Innovation Division at the Department of Financial Services (DFS)…(and) leadership appointments…strengthening the mission of the Department as technology transforms the regulatory landscape.” . . .

Industry Developments

SPOTLIGHT: Eye on Acquiring: An End to the BAMS Joint Venture; Global Payments Updates TSYS Merger
Digital Transactions News – July 30, 2019 

The end of Bank of America Merchant Services, a merchant-acquiring joint venture between Bank of America Corp. and First Data Corp., is at hand.

Charlotte, N.C.-based BofA said Monday it will pursue an independent merchant-acquiring strategy beginning in June 2020, though First Data, which that same day became part of Fiserv Inc., will continue as an “important service provider supporting Bank of America’s global payment solutions.” Bank of America Merchant Services says it processes 17.3 billion transactions annually at more than 700,000 merchant locations. . . .

Mastercard’s Transaction Volume Jumps 18%; Secure Remote Commerce and Contactless Payments Gain
Digital Transactions News – July 30, 2019 (click here for Mastercard Earnings Call transcript)

Mastercard Inc. saw strong growth in its core business in the second quarter, a time when the network continued its push for contactless cards and development of the new Secure Remote Commerce system for online payments.

Mastercard said it switched 21.4 billion transactions globally in the three months ending June 30, up 18% from 18.2 billion in the year-earlier period. In the U.S., the network reported total purchase volume of $427 billion, an 11% increase from $384 billion in 2018’s second quarter. Credit card purchase volume grew nearly 13% on higher spending and business from new issuers. Debit volume increased 9% to $199 billion. . . .

Zelle Outpacing PayPal’s Venmo in Person-to-Person Payments
The Financial Brand – July 30, 2019

Zelle, the bank-owned response to PayPal’s Venmo person-to-person mobile payment service, Square Cash, and others, continues to grow by long strides since its launch in 2017.

Early Warning Services, the network that operates Zelle, announced that in the second quarter 2019 it hit total payment value of $44 billion, spread over 171 million transactions. The payments dollar value represents an increase of almost 13% over the first quarter 2019 and an increase of 56% over the year-earlier quarter. For the second quarter 2019 Venmo reported total payment volume of $24 billion, representing growth of 70% over the second quarter of 2018. . . .

Apple Card will launch in August
CNet – July 30, 2019

Apple Card will hit its summer launch date. During the company’s fiscal third-quarter earnings call Tuesday, CEO Tim Cook announced that the company will begin offering its new card to users next month.

“Thousands of Apple employees are using Apple Card every day in our beta test,” Cook said. “And we plan to begin the rollout of Apple Card in August,” though an exact release date was not given. . . .

It’s Hard to Beat Amazon, And That’s Putting Pressure on the Providers That Serve Small Sellers
Digital Transactions News – July 30, 2019

Big merchants like Inc. are celebrated for virtually friction-free transaction flows, and now that’s putting pressure on the point-of-sale vendors that serve small businesses. That’s because clients want the same kind of experience for their customers, but don’t know how to go about it, a panel of experts said Monday.

“We’re seeing a heightened awareness that [small and medium-size merchants] need to do new and bigger things to compete with the big guys,” said Marc Castrechini, vice president of product management at Cayan, a unit of Columbus, Ga.-based processor Total System Services Inc. But their wish list, he added, “falls into that nebulous bucket—they don’t know what they want.” . . .

JPMorgan Enters China to Take On the World’s Biggest Bank
Bloomberg – July 30, 2019

The West’s biggest bank is getting ready to confront China’s largest lender.

JPMorgan Chase & Co. has vowed to take its “full force” to China, where state-run Industrial & Commercial Bank of China Ltd. is not only the dominant player in the country, but also the world’s biggest bank. The U.S. firm already has approval for a majority stake of its local securities joint venture, and plans to take full ownership of its China operations when rules allow—which should be by 2020. . . .

As Checkout Disappears, Terminal Makers Enter New Territory
PaymentsSource – July 29, 2019 (subscription required)

As checkout-free stores dramatically reduce — or even eliminate — the need for point-of-sale devices, terminal makers are turning their focus to multi-channel services that can keep younger, digitally-savvy customers coming into stores.

Amazon Go and other checkout-free retail concepts have drawn a lot of attention and investment, but retailers can counter that by focusing on the experiences that surround the transaction, contends Jennifer Miles, executive vice president for North America at Ingenico. . . .

The Fiserv-First Data Merger Is Complete
PYMNTS – July 29, 2019

The big deal is now complete: Fiserv announced this morning (July 29) that it has completed its acquisition of First Data Corporation. The two massive firms first inked the deal earlier this year, which will see Fiserv purchase First Data for $22 billion in an all-stock transaction.

At the time the transaction was announced, the companies said users would benefit from a “highly complementary combination” that offers a range of payments and financial services, spanning account processing and digital banking, integrated payments and the Clover POS system, among other products and services. . . .

5 Ways Digital Payments Are Most Disruptive in E-Commerce
PaymentsSource – July 26, 2019

As the e-commerce channel expands its share of total retail sales worldwide, it’s often thought that credit and debit cards are the primary beneficiaries. Clearly consumers can’t write paper checks for most purchases at digital stores, so other instruments are likely to be used. However, depending on the country and consumer habits, cash still remains a viable payment option for e-commerce transactions — with the help of a third party to handle the payment.

Additionally, the two main Chinese mobile wallets, Alipay and WeChat Pay, are seeing strong consumer demand for use in-stores. Similarly, the Indian e-wallet Paytm is experiencing rapid adoption in physical stores and at food carts, where retailers have been slow to adopt credit and debit cards due to their high interchange fees. . . .